Mismanaged student debt causing relationship tension

Can your love survive the bills?
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Can your love survive the bills?

It may be too tricky a topic of conversation for a first date, but the burden of student debt can prove to be a serious obstacle to young love.

Around 83 per cent of students expect to be in debt by the time they graduate, according to New Zealand's Union of Students' Associations (NZUSA), and the legacy lasts into young adulhood and beyond.

Which poses the question - when should someone come clean about how much they owe to a potential romantic partner? 

All borrowings can have an impact on relationships and debt should be readily discussed, said financial advisor from the Professional Advisors Association, Sheryl Sutherland.

"If you can't talk about money before you are in a relationship you sure will have problems talking about it once you are," Sutherland said.

"The old adage is true. Money and, or sex are the cause of most break-ups."

She said although it's wise to pay loans off quickly there were other issues for couples, such as saving for a home deposit or paying down debt with higher interest.

Dunedin student Danielle Blyde admitted her former partner's carefree approach to student debt was enough to call their relationship quits.

She said the stress of managing student debt, and her partner's attitude towards money, led to the break-down.

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"Both of us were looking at our individual debts which were both rapidly increasing. We couldn't see a future together without money stress," Blyde said.

But the film and media student said it was their different approaches to student debt which caused tension between them.

Blyde said that whilst her ex-partner's parents covered his weekly rent, he still chose to loan the full living costs. 

"I was forced to borrow the full amount, but I wasn't able to spend it on whatever I wanted. It had to go on bills and food every week.

"For me, seeing him spend money which technically wasn't income was really stressful and did strain the relationship. It was debt accumulating on essentially nothing," Blyde said.

Similar to many students living away from home, Blyde expects her current debt balance of $39,000 to reach $52,000 by the time she leaves university.

And this figure does not include repayments she has already made from scholarships, holiday work and voluntary contributions.

"I am very aware of money and future plans. I think that anyone I end up with would need to have a similar mind set," Blyde said.

Fashion design student at Wellington's Massey University, Michaela Bloxham, said because paper fees are processed directly between the university and Studylink, many students are not taking notice of the costs.

"Students consider their loans as free money at the moment, so you spend it on whatever you think you need. In reality it's more on what you want," Bloxham said.

Bloxham said although they discuss loans with peers,it is often not mentioned in relationships.

"I guess at the end of study, you would want to think about it more seriously.

"What your loan is, and how that is going to affect you going overseas and your future obviously. It's a lot to pay off," Bloxham said.

Borrowers who choose to work overseas are required to pay standard interest rates six months after leaving New Zealand.

"For me I've always considered that I would like to live overseas as soon as I've finished studying, but obviously it's not that feasible when you both have student loans," Bloxham said.

For many couples out of university, their total student loans are often not balanced.

Career and life coach Allison Fisher, said personal debt should be addressed before it creates division.

"The partner who has the debt needs to take responsibility as to what they are going to do to pay it off. Then the other person really has to accept and not resent it," Fisher said.

Fisher said that going into relationships with large student loans is something people have not had in the past.

"It's another factor to take into account when living now, another complication," Fisher said.

Melissa Clark doesn't think there is any shame in disclosing a student loan as it now a "reality of life".

"I think the worst thing that you could probably do is to not capitalise on your degree and take a job on a lower wage," Clark said.

Clark, 40, said her close friend struggled to save up for a house deposit because of her student debt, and also pushed back having children.

"As a couple we had zero and they had $40,000 owing, and it was enough to prevent her getting a mortgage.

"It didn't destroy her relationship. But it's made that much difference between the two of us," Clark said.  

Hand over the money honey

Most marriages have prenups to split relationship property.

But financial advisors are suggesting couples enter a contracting-out agreement early to avoid acquiring student debt.

Moneymax financial advisor, Liz Koh, advises couples to do a contracting out agreement for any relationship that may be permanent.

This agreement allows couples to opt-out of equal-sharing rules under the Property (Relationships) Act and determine their own agreement.

"It needs to be really clear who is responsible for what and if the relationship ends how many of the debts do you take with you and how many of the assets," Koh said.

The agreement could allow individuals to keep their own existing assets and maintain responsibility for their own debts.

Although there is no "hard and fast rule" Koh said couples should discuss student debts before three years when the "relationship act kicks in".

If couple's have no agreement after 3 years together, total relationship property minus any debts are divided equally between the couple. 

The community law manual states that deciding whether student loans are personal debt or relationship debts is decided on a case by case basis.

 - Sunday Star Times

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